Allowed

Destination of the World (Subcontinent) Pvt. Ltd. v. Shree Raj Travels and Tours Limited

Bombay HC12 Sept 2012CP/988/2008

Case brief

AI extract

What is this about?

The High Court of Bombay allowed a Company Petition seeking the winding up of a travel agency. The Judge rejected the Respondent's defense regarding an unsettled running account and rejected the claim that the transaction cheques were for a security deposit. The Court held that there was no bona fide dispute over the debt since the Respondent failed to respond to demands and statutory notices.

What did the court decide?

The Company Petition was allowed in terms of prayer clauses (a) and (b); the Official Liquidator was directed to act on an ordinary copy of the order.

Destination of the World (Subcontinent) Pvt. Ltd. Vs… — Company and Corporate | Bombay HC (2012)

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CP 988 of 2008

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IN THE HIGH COURT OF JUDICTURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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COMPANY PETITION NO.988 OF 2008

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Destinations of the World (Subcontinent) Pvt. Ltd. ......Petitioner Versus Shree Raj Travels and Tours Limited …..Respondent

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Mr.D.D.Madon, Senior Advocate i/by M/s.Juris Consultus, for Petitioner. Mr.Rajeev Kumar, Senior Advocate with Mr.Khare i/by M/s.Khare Legal Chambers, for the Respondent.

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Ms.Aarti Khadilkar i/by M/s.Bhave and Co., for the State Bank of India.

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CORAM: S.J.KATHAWALLA, J.

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DATE: 12th SEPTEMBER 2012

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P.C. :

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By the above Company Petition, the Petitioner – Destinations of the World (Subcontinent) Pvt. Ltd., seeks winding up of M/s.Shree Raj Travels and Tours Limited ( the Company) on the ground that it is unable to pay its debt. The Company Petition is taken up for hearing and final disposal.

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According to the Petitioner, on 21-12-2006, the Petitioner and the Company executed an Agreement captioned “Singapore Series”, wherein the Petitioner at the request of the Company, agreed to do bookings interalia with hotels in respect of the passengers travelling to

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Singapore on Packaged Tours organized by the Company, on terms and conditions and for consideration more particularly stated in the said Agreement.

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On 27-01-2007, the Petitioner and the Company, similarly executed an Agreement captioned “Malaysia Series” wherein the Petitioner at the request of the Company, agreed to do bookings interalia with hotels in respect of the passengers travelling to Malaysia on Packaged Tours organized by the Company, on terms and conditions and for consideration, more particularly stated therein.

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According to the Petitioner, the method followed in performance of the above mentioned two Agreements was that the Company would from time to time, forward to the Petitioner a passenger list giving details of the passengers who would be travelling on its Packaged Tours to Singapore and Malaysia, and depending on the details of the tour (days, destinations, etc.), the Petitioner would make the necessary bookings with the concerned hotels, tour operators, etc., whom the Petitioner would pay. The Petitioner would, in turn, raise invoices/bills on the Company for the number of passengers for whom such bookings were made. The Company was given a “Credit Period” i.e. it was required to make payment at the end of the corresponding week in the month

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following the month in which the bookings were made. Anticipating a business of Rupees One Crore per Series, the Company had deposited with the Petitioner, 10 cheques of Rs.10 Lakhs each, per Series, which the Petitioner could deposit in the event the payment was not received by it within the Credit Period.

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In accordance with the aforestated Agreements with the Company, the Petitioner in turn from time to time, raised invoices/bills on the Company for the said “bookings”. The first of such invoices was raised on 25-01-2007. Copies of few such invoices are annexed at Exhibit – F to the Petition. According to the Petitioner, the Company and its customers (persons travelling on its Packaged Tours) received the benefit of and enjoyed the bookings arranged and paid for by the Petitioner. No objection or complaint whatsoever was raised by the Company in respect thereof.

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The Company however, did not make payment of the dues to the Petitioner. In the initial months, the Company made payments. These were however, less than the amount invoiced, with the result that the amount of arrears progressively kept on increasing. With the passage of time, for the subsequent months, whilst the amount of “bookings” increased, the amount paid did not, and infact came down, resulting in a

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situation where the outstanding amount increased very significantly. Upon being reminded of the increasing amount of outstanding, the Company kept assuring the Petitioner that these arrears would be cleared soon.

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According to the Petitioner, the cheques issued by the Company for a sum of Rupees two to three lakhs, against the invoices raised by the Petitioner, were also dishonoured, as can be seen from Paragraph 13 of Exhibit H to the Petition. Since by November 2007, the outstanding position showed no sign of improvement and the representatives of the Company when contacted, either gave evasive responses or avoided the Petitioner’s calls, the Petitioner banked the cheques which the Company had agreed that the Petitioner could deposit in the event payment was not received by it within the agreed period. Most of the cheques when deposited were dishonoured on the grounds of either “Funds Insufficient” and/or “Payment Stopped by the Drawer”. According to the Petitioner, the Company thereafter, informed the Petitioner that it was experiencing a temporary liquidity crunch and assured the Petitioner that the payment would be made. The Company never disputed or denied its liability or refused to make payment.

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The Petitioner sent several reminders to the Respondent,

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calling upon them to make payment, particulars of some such emails are set out hereunder :

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(i) The Petitioner by its email dated 21-05-2007 addressed to the Respondent, forwarded a statement of outstanding dues as on 21-052007 wherein the amount due and payable between 25-02-2007 to 30-042007 aggregated to Rs.58,12,454.82. In the said email, the Petitioner recorded that,

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“Following is the outstanding list as of today. As per our telephonic conversation (with Sandeep) I am sending the person tomorrow at 5 p.m. Please sort out the old issues also as early as possible. In case of any querries please contact the undersigned or Ashish”.

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(ii) On 06-06-2007, the Petitioner forwarded an email to the Company as follows :

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“From the following outstanding, we have not received payment for EFE1504 and EFE 1604 (Singapore) till date. Pls pay for these two groups immediately”.

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(iii) On 09-07-2007, the Petitioner forwarded an email calling upon the Company to pay invoices of 07-06-2007, as per the list attached thereto, aggregating to US $ 354833.

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(iv) On 14-07-2007, the Petitioner forwarded following email to

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the Company:

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“Please make the payment for the following overdue amount urgently”.

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(v) On 19-07-2007 the Petitioner forwarded following email to

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the Company:

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“Please make the payment for the groups mentioned in the excel sheet. Please pay us immediately for the groups for May and upto mid June for which due date is already over” .

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(vi) On 30-07-2007, the Petitioner forwarded the following email to the Company:

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“ Please make the payment urgently”.

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(vii) On 22-08-2007, the Petitioner forwarded the following email to the Company :

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“Further to our telecon, please note that we are depositing the four cheques of Rs.10 lacs each as per the schedule given by you. But you are requested to let us know the invoice number against which these payments have been made. Else we will adjust these against the earlier invoices which are outstanding (subject to realization of cheques). We need to have these details to remit to our overseas suppliers. The same detail is also required for the payment of Rs.20 lacs made by you. We are attaching the list of outstanding invoices for your immediate clearance of payments”.

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The statement setting out the particulars of 136 invoices aggregating to Indian Rs.4,54,37,323.57 and US $ 1084859, is attached to the said email.

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(viii) On 25-08-2007, the Petitioner forwarded the

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following email to Mr.Lalit Sheth, Chairman and Managing Director of the

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Company, which reads thus :

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“Dear Mr.Sheth,

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After our last meeting in your office in Bombay and your assurance of clearing our outstanding for business done in Singapore and Malaysia, the amount stands at over 4 Cr. On your repeated assurance we waited until 21^st August, 2007 a date on which you assured us that all outstanding payments will commence getting cleared. On 20^th Aug 07, Mr.Nandakumar of our office collected 4 cheques of Rs.10 lacs each, the cheques as before have bounced at the bank. This is not even 10% of our outstanding and that too have not cleared.

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My Head Office will want to take serious action now. Kindly advise what am I supposed to do in such circumstances”.

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(ix) By an email dated 18-10-2007, the Petitioner informed the

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Company that the following cheques had bounced and returned by the

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Bank:

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“960764 dt.12.10.07 Rs.4,00,000/-

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960769 dt.11.10.07 Rs.4,00,000/-

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Please make the necessary arrangements to pay the same immediately.

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Please note that we have received only Rs.64,00,000/- against the total outstanding of Rs.4,89,58,045.72 as per the list below. We need the immediate clearance for the balance payment of Rs.4,25,58,045.72. You are requested to let us know the invoice number against which the payment of Rs.64,00,000/- have been made. Else, we will adjust these against the earliest invoices which are outstanding. We need to have these details to remit to our overseas suppliers. Following is the list of outstanding invoices for your immediate clearance of payments.......

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Particulars of outstanding 154 invoices aggregating to US $ 1169885.89, are set out.”

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(x) On 12-11-2007, the Petitioner sent the following email to

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Mr.Lalit Sheth, Chairman and Managing Director of the Company, which was follows :

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“You had assured us payments this month. You had spoken to me over the phone and assured me that on Tuesday the 5^th November, you would remit 70000 USD. When my GM Mr.Nandkumar met you on 5^th , you handed over USD 50000 worth of cheques in denomination of 5 lac each to be banked over a period of one week. This itself is unfair, after you assuring me of one payment of USD 70000 followed by more payments in Nov.

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Already your cheque has bounced once again, that too of Rs.5 lacs I do not know how and when will we be able to recover 3.5 Cr of outstanding from your company which is now due for over 6 months.

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It is very unfortunate that now we are unable to even recover small payments. Raj Goodwill is at stake in this manner. I request you to kindly take immediate action to clear our long over due outstanding at once.”

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(xi) On 14-11-2007, the Petitioner forwarded the following

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email to Mr.Lalit Sheth, Chairman and Managing Director of the Company,

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which reads thus :

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“As you can see the balance two cheques have also bounced at the bank. That makes it 3 cheques in a row. This is being viewed seriously at our end. We will need to urgently come up with a total solution from your end for deciding further course of action”.

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(xii) On 20-11-2007, the Petitioner once again forwarded an email to Mr.Lalit Sheth, Chairman and Managing Director of the Company, as follows :

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“As discussed, I will call you again at 1600 hrs. Please note that my Head Office has been asking for the complete recovery of outstandings. WE are under tremendous pressure to recover this outstanding now and you are requested to kindly clear this immediately”.

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(xiii) On 21-11-2007, the Petitioner forwarded an

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email to Mr.Lalit Sheth, Chairman and Managing Director of the Company,

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which read thus :

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“As per our telecon this morning, we await your call by tomorrow with regards to clearing the outstandings. As communicated to you, we are under pressure to recover the complete outstandings and have no more reasons to offer to our HO. You are requested to kindly consider this request to clear the full outstanding” .

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(xiv) On 07-12-2007, the Petitioner forwarded an email to

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the Company, which reads as follows :

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“Dear Lalit Bhai,

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This as I have written to you earlier is now a serious concern to our Company. Too many dates of payments have lapsed with no payment received. Kindly up date us on your end at the earliest”.

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The Petitioner has at page 86 of the Petition set out the particulars of 56 emails forwarded to the employees of the Company. Since the Company failed and/or neglected to make the payment due, the Petitioner through their Advocate addressed a Statutory Notice dated 1407-2008 to the Company calling upon the Company to pay an amount of Rs.4,18,24,945.95 within three weeks from the date of receipt of the said statutory notice. After receiving the said notice, the Company failed to respond to the same or to make any payment as called upon therein. The Petitioner therefore, filed the present Company Petition submitting that presently an aggregate principal sum of Rs.4,18,24,945.95 is due and payable by the Company to the Petitioner. The Petitioner has annexed the statement at ‘Exhibit I’ to the Petition, setting out therein the material particulars and the complete details of how the said debt figure is arrived at. It is submitted in the Petition that despite the Petitioner having extended all possible accommodation and exhibiting maximum patience towards the Respondent, the Company has failed and neglected and continues to fail and neglect to pay the said sum or any part thereof to the Petitioner. It is submitted that the Company is commercially insolvent. The Petitioner submits that the Company has failed to even respond to the

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statutory notice and therefore, deserves to be wound up.

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The Company has filed its Affidavit-in-Reply dated 13-032009, wherein the Company has stated that it has not been served with the statutory notice by the Petitioner as alleged, and therefore the Petitioner has failed to produce any document showing acknowledgment of the Company in token of having received the said notice. It is submitted that the onus is upon the Petitioner to prima facie satisfy this Court that the amount claimed is legally due and recoverable from the Respondent. It is submitted that the Petitioner has not proved that an amount of Rs.4,18,24,945.95 as claimed in the Petition, is due and payable by the Company to the Petitioner. It is submitted that there is a running account between the parties and therefore, the present petition cannot be a subject matter of winding up, nor can there be a presumption of inability to pay. It is submitted that the Petitioner will have to prove the said alleged entries in the alleged statement Exhibit I to the Petition, and this cannot be done in a winding up petition. It is submitted that the Agreements as regards the Singapore and Malaysia Series dated 21-12-2006 and 27-012007 respectively, are not stamped, as required under the Bombay Stamp Act and are therefore inadmissible in evidence. It is submitted that certain invoices which are unpaid according to the Petitioner, do not pertain to the

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abovementioned Agreements, but pertain to other Series. It is submitted that no particulars are provided qua the debit note aggregating to Rs.4,75,865.29 and the credit note aggregating to Rs.7,28,586.06. It is submitted that several credits have not been given by the Petitioner to the Respondent, which they were entitled to.

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The Petitioner has filed Affidavit in Rejoinder dated 04-062009 and have denied and disputed all the allegations made by the Company in its Affidavit-in-Reply. The Company has not filed any SurRejoinder to the same, but has filed further Affidavit on behalf of the Company dated 15-08-2010, wherein for the first time, the Company has alleged that the Petitioner has failed to provide services upto the required standard of the Company and that the Company has been overcharged. Again for the first time, it is alleged that the cheques issued by the Company to the Petitioner were for “National Security Deposit”. In the said additional Affidavit, the Company reiterated its stand that it had not received the statutory notice.

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Mr.Rajeev Kumar, the Learned Senior Advocate appearing for the Respondent, submitted that the Company is not pressing its contention that the statutory notice is not served on the Company. However, he submitted that the accounts have not been crystalized

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between the Parties. He submitted that as stated in para No.4 of the Affidavit of the Company, both the Petitioner and the Respondent Companies are having on going relations and are working on a running account basis wherein payments to be made to each other for the services rendered to each other are set off. Accounts are then settled and cleared off. However, in the instant case, the account is not yet settled and the amounts are not crystallized. In support of his contention, Mr.Kumar has relied on a decision of the Madras High Court in the case of V.K.Abraham V/s. N.K.Abraham1.

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Mr.Kumar further submitted that the cheques were issued towards Notional Security and that they bounced upon presentment, since the Petitioner was not supposed to deposit the same. He further submitted that some of the invoices included in Exhibit I to the Petition, do not pertain to the Singapore Series or Malaysia Series, but relate to other services. He also submitted that the Company is disputing the debit notes, and there is nothing to show how or on what basis the debit note aggregating to Rs.4,75,865.29 and the credit note aggregating to Rs.7,28,586.06 were raised.

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The State Bank of India (‘SBI’) has sought permission of

1 AIR 1978 Mad 56

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this Court to intervene in the matter or in the alternative to make it submissions. Accordingly, the Bank is allowed to make its submission. The learned Advocate appearing for the SBI has submitted that an amount of Rs.31 Crores is due and payable by the Company to the SBI on 31-032012. As against the said amount due, the SBI holds security only to the extent of Rs.17 Crores. On a query raised by the Court, qua the position of the current liabilities of the Company as against its assets, Mr.Kumar, the learned Senior Advocate appearing for the Respondent, informed the Court that he is unable to answer the said query at this point of time and would have to seek instructions in order to do the same.

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I have gone through the pleadings and have also considered the submissions advanced on behalf of the Parties. The Company has not specifically denied in its first detailed Affidavit-in-Reply, nor in its second detailed additional Affidavit that it has not received the emails set out at Exhibit G to the Petition, some of which are set out by me hereinabove. The Company has also not specifically denied the contents of the said emails and it is also not the case of the Company that they had responded to any of the emails and/or called upon the Petitioner to finalize the accounts. Infact, from the said emails it is clear that the Petitioner has categorically pointed out to the Company that the invoices have become

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due, and that the Petitioner has not received payments for the same . In certain cases, where payments are received from the Respondent, the Petitioner has written to the Company inquiring as to against which invoices the said payment is to be appropriated . If the Petitioner was in fact maintaining a running account for the Company, it would not have sent such emails to the Company, but would have only asked them to make on account payments. If the Petitioner would have been maintaining a running account, as alleged by the Company, the Company would have atleast answered one of the 56 emails sent by the Petitioner to it, pleading for payment of their outstanding dues, by stating that they have to first settle their accounts. The Company is therefore not entitled to contend that the Petitioner is maintaining a running account of the Company. The decision in V. K. Abraham (supra) is therefore of no assistance to the Company. The Company has admittedly also not responded to the statutory notice, pointing out that there is no question of any payment as claimed by the Petitioner, since the “running account” between the Parties is not settled. In view thereof, I am satisfied that it is only after the receipt of the present winding up petition that the Company thought of coming up with some defence and therefore, for the first time alleged that the accounts between the parties have not been settled and therefore, the

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present winding up petition is not maintainable.

¶130

Repeatedly, statements giving particulars of the outstanding invoices have been forwarded to the Respondent, as can be seen from the annexures to the Petition, including the statutory notice. At no point of time, the Company has disputed any of the said invoices raised by the Petitioner on them and have never contended that the amount due therein, are not payable by the Company to the Petitioner. Though, the Petitioner has repeatedly recorded in its emails about the cheques issued by the Company having bounced, the Company has at no time, taken a stand that the Petitioners were not supposed to deposit the same for encashment, since as now alleged, the said cheques were issued as “National Security Deposit or Notional Security Deposit”. Infact, the 58 cheques aggregating to Rs.4,1,499,452 set out in the statutory notice includes cheques of Rs.1,90,209, Rs.1,95,077, Rs.2,15,295/-, Rs.1,73,746, Rs.2,18,678 and Rs.2,30,932/-, which cheques could never have been issued as security for the repayment of the sums due and payable by the Company to the Petitioner. It is therefore clear that the Company has made false statement on oath knowing the same to be false.

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The Petitioner has admitted that they have included all the outstanding invoices which have not been paid/cleared by the Respondent,

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and have not merely restricted the invoices raised to the two aforementioned Agreements, and that they are entitled to do so in law. The Petitioner has set out in paragraph No.5 of the Petition that the statement at Exhibit I to the Petition, reflects (i) details of the invoices raised by the Petitioner (ii) brief particulars of what these invoices pertain to; and (iii) details of the payments made by the Respondent. A perusal of the statement reveals that the position therein can be summarised as under :

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Aggregate amount of all Invoices – Rs.7,08,14,623.92 Aggregate amount of all Debit Notes - Rs.4,75,865.29

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(+)

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Aggregate amount of all Credit Notes - Rs.7,28,586.06 (-) Aggregate amount due - Rs.7,05,61,903.15 Payment received - Rs.2,87,36,957.20 Outstanding - Rs.4,18,24,945.95.

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In view thereof, I am of the view that there is no doubt that

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the Company owes the Petitioner the debt as mentioned hereinabove, entitling it to a winding up order. In re Tweeds Garages Ltd.² , it was clearly

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held that it would be unjust to refuse a winding up order to the Petitioner

2 (1962) 1 Ch. 406

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who has admittedly owned moneys which have not been paid merely because there is a dispute as to the precise amount owning. The Hon’ble Apex Court in the case of Madhusudan Gordhandas and Co. V/s. Madhu Woolen Industries3, has interalia held that “...... Where however, there is no doubt that the Company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the Court will make a winding up order without requiring the creditor to quantify the debt precisely. (see Twedds Garages Ltd., Re..7). ”

¶147

The Division Bench of this Court in Tata Finance Ltd. V/s. Kanoria Sugar and General Manufacturing Co. Ltd., Mumbai4, has considered various decisions including the decision in re Tweeds Garages Ltd. (Supra) and of the Hon’ble Supreme Court in Madhusudan Gordhandas and Co. (Supra) as also decisions of this Court and other High Courts on the subject. The decision of this Court in Tata Finance Ltd. (Supra) held as follows :

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“When a part of the claim made by the creditor is seriously disputed but the remaining portion prima facie appear to exceed the limit of Rs.500/- indicated in Section 434 of the Act, it would be unjust to refuse wind up order on the ground that there is a dispute as to precise amount owned”.

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From the aforesaid facts, I am satisfied that the defence

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3 (1972) 42 Comp. Cases 125,

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4 2002(1) Mh.L.J. 617

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raised by the Company completely lacks bonafides and the same is untenable, baseless and dishonest. As held in Advent Corporation Pvt. Ltd. in Re⁵ , once there is non-compliance with a statutory notice and the Court comes to the conclusion that there is no bona fide dispute with regard to the Petitioner’s debt, the creditor is entitled to a winding up order ex debito justitiae.

¶156

The Company Petition is therefore, allowed in terms of prayer clauses (a) and (b). The Official Liquidator shall act on an ordinary copy of this order duly authenticated by the Associate of this Court.

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( S.J.KATHAWALLA, J. )

¶158

5 (1969) 39 Com. Cas. 463,

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Destination of the World (Subcontinent) Pvt. Ltd. v. Shree Raj Travels and Tours Limited

Case brief

What is this about?

What did the court decide?

Destination of the World (Subcontinent) Pvt. Ltd. v. Shree Raj Travels and Tours Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

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